Chase Bidding Nearly $31 Billion for J.P. Morgan

Patrick McGeehan, Andrew Ross Sorkin, New York Times

Published 4:00 am, Wednesday, September 13, 2000

2000-09-13 04:00:00 PDT New York -- Chase Manhattan Corp., the third-biggest banking company in the United States, is in the final stages of negotiations to acquire J.P. Morgan & Co., one of the most storied banks in the world, executives close to the talks said yesterday.

Chase was considering paying about $30.9 billion in stock, or nearly $195 a share, to acquire J.P. Morgan, according to people close to the banks. An agreement could be announced as early as today.

The new firm would be called J.P. Morgan Chase, the executives said. William B. Harrison, chairman and chief executive officer of Chase, would be chief executive of the combined institution. Douglas A. Warner III, chairman and chief executive of Morgan, would be chairman of J.P. Morgan Chase.

Chase has been striving to transform itself into a global financial powerhouse, and acquiring Morgan could sharply accelerate the process. For more than a decade, Morgan has been changing from a commercial bank with a blue-chip list of clients into a firm focused on investment banking. Acquiring Morgan could catapult Chase into the big leagues of investment banking.

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"This is the deal that should have been done a year ago," said Michael Mayo, an analyst at Credit Suisse First Boston.

The deal, if it is completed, would end months of speculation about who might acquire the 150-year-old Morgan.

In the past few months, there have been several high-priced acquisitions of American financial companies, but none of those deals involved two firms with the heritage and clout of Chase and Morgan.

Chase, which was founded in 1799, has grown rapidly in recent years through mergers with some of New York's biggest banks, including Chemical Bank and Manufacturers Hanover. More recently, it has been buying up smaller investment banking firms. To strengthen its position as an underwriter of technology companies, it acquired San Francisco's Hambrecht & Quist last year.

But even with those purchases, Chase faced the prospect of losing ground as competitors made even bigger acquisitions. UBS, the giant Swiss bank, agreed to pay more than $12 billion to buy PaineWebber earlier this year. Last month, Credit Suisse Group, another Swiss bank, agreed to pay $12.8 billion to buy Donaldson, Lufkin & Jenrette.

For its part, Morgan has stayed away from mergers and major acquisitions. But according to one source, Warner has been shopping the company to prospective buyers for several months.